By Alessandro Plateroti
(Il Sole 24 Ore) – Do you fear the vicissitudes of the stock market? Almost all who invest their savings will give quite an expected answer to this question. But for those who want to learn more about the fears experienced by investors, it would be good to follow gold and diamond sales for investment purposes. There is not much to say about the behavior of the yellow metal considered the best safe haven, taking into account the movement of prices for the gold ounce at COMEX. The opposite is true regarding diamonds - a decade ago, it was a nonexistent market, but now it seems to compete even with government bonds.
In Italy, where short-term treasury obligations under a zero interest rate are now bought by banks only, the phenomenon associated with diamonds is booming. And people buying investment diamonds are not the classic type of such customers employing private banking and wealth management. “From being an investment instrument for the minority, diamonds have turned into a “democratic” market - they cost 3,800 to 20,000 euros and bought by people aged 40 to 65 years,” readily explains Maurizio Sacchi, a pioneer of the Italian investment diamond market and founder of Diamond Private Investment, a brokerage firm asserting its market leadership. “To a large extent we are talking about entrepreneurs and employees, most of whom have retired. Why do they buy them? Because diamonds are a store of value; because they are not exposed to the volatility of stock markets, as well as because they are not taxed if purchased or resold. Not to mention the fact that we offer a buy-back guarantee, if the client wants to sell them.” Investment stones are not sold mounted in jewelry: behind them there is a small chain of intermediaries, such as Diamond Private Investment, which operate on the market in Antwerp, Belgium. This sector is regulated by diamond mining giant De Beers - the company operates as a central bank to provide price stability by increasing or decreasing diamond production at the mines it controls. Recently, it announced the first price increase since June 2014: + 2% at a diamond auction (a total of 10 such auctions are held in a year), which brought US $ 660 million to this group.
Despite the fact that, unlike gold, diamonds are not traded continuously to have their prices fixed on a regulated market, such pricing opacity does not slow down the growth of their value. “Over the past ten years, the economic downturn and volatility in the markets contributed to the boom: Diamond Private Investment registered 20,000 customers in this period. Only at the end of April, we have registered another 8,980 customers. The company’s revenue went up from 70 million in 2014 to 150 million in 2015, and we expect to rake in 450 million in 2016. The next step is Europe: as long as the rates stay at the zero level and the stock market is falling, there is a space for diamonds,” Maurizio Sacchi adds. And this space is large, especially at banks, which are an excellent sales channel. “We have an agreement with Intesa Sanpaolo, Banca Monte dei Paschi di Siena, BPM and a dozen of other agencies, with more than 12,000 banking outlets,” continues Maurizio Sacchi. Taking into account the “drought” in the bank bond market, diamonds have become a good investment for the banks that sell them.
What is there to say? The quantitative easing carried out by the European Central Bank, of course, saved the euro and the financial system in the Eurozone, but did little to calm small depositors. After all, the money buys assets, but not trust.
